[Federal Register Volume 68, Number 248 (Monday, December 29, 2003)]
[Notices]
[Pages 75012-75013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31810]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48947; File No. SR-Phlx-2003-81]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating to a Pilot Program To Deploy 
the Options Floor Broker Management System

December 18, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 17, 2003, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Phlx. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons and to approve the 
proposal, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend its pilot program pertaining to the 
Options Floor Broker Management System (the ``System'') from November 
14, 2003, until February 6, 2004.\3\ The System is a new component of 
the Exchange's Automated Options Market (AUTOM) and Automatic Execution 
(AUTO-X) System.\4\
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    \3\ On July 31, 2003, the Exchange filed a proposed rule change 
to implement a pilot program to deploy the Exchange's new System. 
The proposed rule change was noticed, and accelerated approval was 
granted thereto, on July 31, 2003. The pilot was scheduled to expire 
on August 29, 2003. See Securities Exchange Act Release No. 48266 
(July 31, 2003), 68 FR 152 (August 7, 2003) (SR-Phlx-2003-56). On 
August 29, the Commission extended the pilot to September 12, 2003. 
See Securities Exchange Act Release No. 48425 (August 29, 2003), 68 
FR 53210 (September 9, 2003) (SR-Phlx-2003-60). On September 12, 
2003, the Commission extended the pilot again until November 14, 
2003. See Securities Exchange Act Release No. 48490 (September 12, 
2003), 68 FR 54926 (September 19, 2003). In order to avoid a lapse 
in the effectiveness of this pilot, the Commission now is approving 
the Exchange's proposal to extend the rule from November 14, 2003 
until February 6, 2004. The Exchange has also filed for permanent 
approval of the proposed rules. See Securities Exchange Act Release 
No. 48265 (July 31, 2003), 68 FR 47137 (August 7, 2003) (SR-Phlx-
2003-40). The Exchange acknowledges that SR-Phlx-2003-40 and 
Amendment No. 1 thereto are subject to public comment, which may 
result in amendments to the proposed rules.
    \4\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Orders delivered through AUTOM may be 
executed manually, or certain orders are eligible for AUTOM's 
automatic execution feature, AUTO-X. Equity option and index option 
specialists are required by the Exchange to participate in AUTOM and 
its features and enhancements. Option orders entered by Exchange 
members into AUTOM are routed to the appropriate specialist unit on 
the Exchange trading floor. See Exchange Rule 1080.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Phlx included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Phlx has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to extend the 
effectiveness of the rules governing the System beyond the current 
effective date of November 14, 2003, in order to continue to have rules 
in place concerning the System and to ensure that Floor Brokers using 
the System during the continuing deployment would not be in violation 
of current Exchange rules regarding ticket marking requirements. The 
rules had previously been effective through August 29, 2003, extended 
through September 12, 2003, and extended again through November 14, 
2003.\5\
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    \5\ See note 3, supra.
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    The System is designed to enable Floor Brokers and/or their 
employees to enter, route and report transactions stemming from options 
orders received on the Exchange. Floor Brokers or their employees 
access the System through an electronic Exchange-provided handheld 
device on which they have the ability to enter the required information 
as set forth in Phlx Rule 1063(e), either from their respective posts 
on the options trading floor or in the trading crowd. The System will 
eventually replace the Exchange's current Floor Broker Order Entry 
System (``FBOE''),\6\ as part of a roll-out of the new System floor-
wide.
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    \6\ See Securities Exchange Act Release No. 41524 (June 14, 
1999), 64 FR 33127 (June 21, 1999) (SR-Phlx-99-11). The FBOE, a 
component of AUTOM, currently provides a means for (but does not 
require) Floor Brokers to route eligible orders to the specialist's 
post, consistent with the order delivery criteria of the AUTOM 
System set forth in Exchange Rule 1080(b). The new System would 
include the same functionality as the FBOE, in addition to providing 
an electronic audit trail for non-electronic orders received by 
Floor Brokers by way of the entry of the required information in 
proposed Phlx Rule 1063(e).
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    All of the rules pertaining to the System effective November 14, 
2003 are proposed to be extended until February 6, 2004, including: 
Exchange Rules 1014(g), 1015, 1051, 1063, 1064, and 1080.06, as well as 
Option Floor Procedure Advices (``Advice'') A-11, B-6, B-8, C-2, C-3, 
F-1, F-2, and F-4.
    The Exchange believes that the System will enable Floor Brokers to 
handle orders they represent more efficiently, and will further enable 
the Exchange to comply with the audit trail requirement for non-
electronic orders required under the Order Instituting Public 
Administrative Proceedings Pursuant to section 19(h)(1) of the

[[Page 75013]]

Securities Exchange Act of 1934, Making Findings and Imposing 
Sanctions.\7\
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    \7\ See Securities Exchange Act Release No. 43268 (September 11, 
2000) and Administrative Proceeding File 3-10282 (the ``Order'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \8\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \9\ in particular, in that it 
is designed to promote just and equitable principles of trade, remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system, and to protect investors and the public 
interest, by providing a System that enables Floor Brokers to handle 
orders they represent more efficiently, while enabling the Exchange to 
comply with the requirement in the Order to provide an electronic audit 
trail for non-electronic orders entered on the Exchange.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-Phlx-2003-81. The file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
hardcopy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Phlx. All 
submissions should refer to File No. SR-Phlx-2003-81 and should be 
submitted by January 20, 2004.

IV. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular the Commission finds that the proposed rule 
to extend the rules relating to the System on a pilot basis until 
February 6, 2004 is consistent with section 6(b)(5) of the Act, which 
requires that the rules of an exchange be designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national securities System, 
and protect investors and the public interest.\11\
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    \10\ In approving this proposed rule change, the Commission has 
also considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of the publication of 
notice thereof in the Federal Register. The Commission believes that 
granting accelerated approval to the proposed rule change on a pilot 
basis will allow the Exchange to have enforceable rules governing use 
of the Exchange's new System in effect prior to permanent approval of 
the rules, and will help ensure that members are properly trained and 
familiar with the rules. In addition, Commission is granting 
accelerated approval retroactively to November 14, 2003, in order to 
prevent a lapse in the effectiveness of the Exchange's rules governing 
operation of the System to ensure continuity of the pilot.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-2003-81) is approved on 
an accelerated basis and is effective retroactively from November 14, 
2003, on a pilot basis until February 6, 2004.
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    \12\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31810 Filed 12-24-03; 8:45 am]
BILLING CODE 8010-01-P